Delivering Value for All Health Care Stakeholders Larry Merlo President & Chief Executive Officer
Agenda Our Value Proposition Has Never Been Stronger Our Value Proposition Has Never Been Stronger We See Compelling Opportunities in a Robust Health Care Market How We’ll Drive Long -Term Enterprise Growth 2
The Most Extensive Suite of Leading Assets… Cost Retail Management Long-Term Tools Mail Care Retail Specialty Clinics Clinical Infusion Programs Patients Medical Digital Claims Providers Payors Editing …enabling us to deliver superior outcomes at a lower cost 3
Our Integrated Model Drives More Affordable, Accessible and Effective Care Proprietary Programs Appropriate Utilization, Better Outcomes Maintenance Choice Higher penetration rates of programs, resulting in better outcomes Specialty Connect Pharmacy Advisor Health Engagement Engine Full View of Patient Clinical rules engine with powerful Enabling single patient record and analytical capabilities, providing real- simplicity of single digital platform to time, actionable information manage all prescriptions 4
Traditional Competitor Touchpoints Are Limited Retail Pharmacy Competitors Health Providers Patients Senior Employers Government Health Systems Living Plans 5
Traditional Competitor Touchpoints Are Limited PBM Competitors Health Providers Patients Senior Employers Government Health Systems Living Plans 6
Our Suite of Assets Provides Touchpoints Across All Health Care Stakeholders Health Providers Patients Senior Employers Government Health Systems Living Plans 7
Our Competitive Advantage: Premier company with the ability to impact patients, payors and providers with innovative, channel-agnostic solutions Deep clinical expertise and insights enable us to help deliver superior outcomes at a lower cost Unmatched CVS Pharmacy value proposition for all payors Broadest specialty capabilities to holistically manage patients in growing market Leading pharmacy provider in long-term care , enabling broader patient reach across the care continuum Site-of-care management capabilities to move patients to more cost-effective sites Largest retail clinic operator , providing convenient, cost-effective care Unparalleled scale in the U.S. making us a low-cost provider 8
Continued Selling Season Success … More than $40 billion in gross wins over past five years, with client retention of 96% to 97% 9 Refer to endnotes for additional information.
…Fueling Growth in PBM Lives and Enterprise Volume PBM Lives Under Management Enterprise Rx Volume (millions) (Rx dispensed, millions) 89 1,380 1,360 80 1,170 72 1,075 1,045 68 62 2013 2014 2015 2016E 2017E 2013 2014 2015 2016E 2017E 10 Refer to endnotes for additional information.
Agenda Our Value Proposition Has Never Been Stronger We See Compelling Opportunities in a Robust Health Care Market We See Compelling Opportunities in a Robust Health Care Market How We’ll Drive Long -Term Enterprise Growth 11
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of Digital 12
T R E N D M A N A G E M E N T Growth in Health Care and Pharmacy Spend Projected to Outpace GDP Growth Annual Growth Rate Drivers of Trend (%, 2015-2025) • Increased utilization 6.7% − Growing prevalence of chronic disease 5.8% 4.5% • Rising prescription costs − Growth in specialty − Drug price inflation Gross Health Prescription Drug Domestic Expenditures Expenditures Product 13 Refer to endnotes for additional information.
T R E N D M A N A G E M E N T Clients Continue to Value PBMs as an Indispensable Solution to Rising Costs Clients’ Top Rated Cost Control Methods 68% Pharmacy Management Techniques 34% Increased Employee Cost-Sharing 34% Initiatives to Improve Well-Being 31% Full Replacement CDHP 30% Disease/Condition Management 14 Refer to endnotes for additional information.
T R E N D M A N A G E M E N T Suite of Capabilities Improving Health Care Affordability Cost Management Solutions Utilization Site-Of-Care Cost management Management Management solutions have lowered client Formulary Medical Claims trend to Management Editing 3.3% 3.3% Network Real-Time Strategies Surveillance Generic Clinical Programs Programs 15 Refer to endnotes for additional information.
T R E N D M A N A G E M E N T Mitigated Branded Price Increases With Cost Management Solutions Branded Rx Price Growth (total market, IMS Health) 14.3% 12.4% 11.5% 10.0% 9.3% 9.1% 8.7% 5.1% 4.9% 2.8% 2011 2012 2013 2014 2015 Gross Net 16 Refer to endnotes for additional information.
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of Digital 17
G O V E R N M E N T Government Accounts for Two-Thirds of Health Insurance Spending Government Health Insurance Spend Key Drivers ($, trillions) 2.9 • Growth in government programs 2.1 − Medicare 1.6 − Medicaid • These businesses are lower margin, but have higher utilization 2015 2020E 2025E % of insurance 68% 66% 67% spend 18 Refer to endnotes for additional information.
G O V E R N M E N T Demand for Cost-Effective Care Will Remain Despite Uncertainty Around Health Care Reform Future Outlook U.S. Uninsured Rate • Many unknowns around repeal 14.3% and replace 11.2% • Some ACA policies could remain, while others could change 8.3% • Need for coverage expected to remain 2012 2014 2016E CVS Health can pivot to address policy changes with the right solutions 19 Refer to endnotes for additional information.
G O V E R N M E N T CVS Health Well-Positioned to Capitalize on Growth in Medicare Medicare Enrollment CVS Health Advantages (lives, millions) • CVS Caremark: 12 million total 71.6 Med D members 62.6 − SilverScript is the largest PDP with 5.6 54.0 million members − Also support Med D/MAPD offerings of more than 40 health plans • CVS Pharmacy: Medicare represents 23% of prescriptions dispensed • Omnicare is a leading pharmacy 2015E 2020E 2025E provider in the long-term care market 20 Refer to endnotes for additional information.
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of Digital 21
V A L U E - B A S E D C A R E Movement Towards Value-Based Care Creates Need for New Cost Management Solutions Provider Reimbursements Tied to Value Despite the anticipated shift ~60% of reimbursement to value- 45% based payments, only 26% of providers are currently meeting their goals to lower health care costs Today 5 Years From Now Expectation is that value-based care will be key determinant of success 22 Refer to endnotes for additional information.
V A L U E - B A S E D C A R E Multitude of Ways We Provide Cost-Effective Care Unique integrated programs, 90-day programs, formulary Pharmacy Care designs and value-based contracting Providing health care services, including wellness and MinuteClinic chronic care support Home or alternate-site infusion services can dramatically Infusion lower costs Avoiding costly hospital readmissions by preventing Care Transitions lapses in adherence Med D Star Ratings Driving Med D Star ratings through clinical capabilities Powered by Health Engagement Engine and brought to life Clinical Programs through face-to-face interactions 23
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of Digital 24
S I Z E A N D S C A L E Unsurpassed Procurement Scale Through Enterprise Dispensing Volume 2016 Estimated Rx Volume CVS Health Advantages (Rx dispensed, millions) Unsurpassed scale and expertise allows us to be an efficient 1,360 purchaser of pharmaceuticals 930 Walgreens Procurement scale further Express Scripts 350 enhanced by Red Oak Sourcing Aetna + Humana 140 120 Anthem + Cigna 100 OptumRx 25 Refer to endnotes for additional information.
S I Z E A N D S C A L E Ability to Aggregate Claims Volume Creates Value for Clients 2016 Estimated Claims Volume CVS Health Advantages (Rx managed, millions) Managed claims volume supports negotiations for: 1,385 − Rebates − Price protection 1,275 Express Scripts − Formulary placement 1,000 OptumRx More than 90% of rebates overall are passed back to clients 650 Aetna + Humana Competition in drug classes allows 500 Anthem + Cigna us to utilize scale more effectively 26 Refer to endnotes for additional information.
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